Subscription Commerce Benchmarks: 7.2% of Customers At Risk of Involuntary Churn Each Month

May 21, 2018

This article is included in these additional categories:

B2B | Customer-Centric | Digital | Education | Industries | Media & Entertainment | Technology | Video

Subscriber retention is one of the most – if not the most – important facets of successful subscription businesses. Keeping subscribers satisfied with products and services is one thing – but what about involuntary churn, such as through failed payments and credit card declines? Recurly dives into its data to provide some benchmarks.

Overall, based on an analysis of 1,200 subscription businesses over a 4-month period, Recurly says that these businesses are at risk of losing an average of 7.2% of their subscribers each month due to involuntary churn.

[Please note that all figures in this article refer to median averages.]

How Potential Subscriber Loss Varies by Business Type

The risk of involuntary churn is considerably higher among B2B (7.5%) than B2C (6.6%) subscription businesses, per the report. That’s an interesting result in light of previous data from Recurly, which had found (in 2015) that involuntary churn was a greater factor in churn rates for B2C than B2B businesses.

Involuntary churn rates – defined as the percentage of total subscribers that could be lost each month if decline management strategies aren’t used – also differ among industries. Consumer Services subscription businesses have the highest risk of involuntary churn, with 8.3% of subscribers at risk each month, followed by Media & Entertainment (7.6%) and SaaS (7.5%) businesses.

By comparison, Healthcare (5.6%) and OTT/SVOD (6.2%) businesses have lower rates of potential subscriber contraction due to involuntary churn.

Meanwhile, the data suggests a (weak) correlation between price points and involuntary churn: businesses with an average revenue per customer (ARPC) of less than $50 had below-average potential subscriber loss, while those with ARPC of at least $50 had above-average rates.

Those rates ranged from a low of 6.4% (for ARPC <$10) to a high of 7.9% for businesses with ARPC of $50-100, closely followed by businesses with ARPC of more than $250 (7.8%).

Decline Management Processes Can Recover 7 in 10 At-Risk Subscribers

Recurly also looked at the efficiency of decline management processes, which work to keep billing information current and communicate past due invoices with subscribers.

The analysis found that these automated methods saved almost 7 in 10 (69.4% of) subscribers who were at risk of involuntary churn. The processes proved particularly effective with B2B businesses, saving three-quarters of at-risk subscribers, versus 60% for B2C companies.

Among industry types, SaaS companies seem to have the most to gain from using decline management processes: fully three-quarters of their subscribers at risk of involuntary churn could be kept by decline management strategies.

As for price points, the study’s results indicate that companies with higher ARPCs tend to have higher decline management efficiencies.

Subscription businesses certainly stand to benefit from the implementation of these techniques. On average, the companies analyzed recovered 12% of monthly revenue from decline management techniques, with B2B businesses again ahead of their B2C counterparts (12.8% and 10.2%, respectively). However the revenue lift percentage attributed to decline management strategies dropped alongside higher ARPCs, which Recurly says could be because lower ARPC businesses “often serve a larger customer base and process larger transaction volumes, so decline management strategies can apply to a larger universe.”

B2B Businesses Recover A Majority of Past Due Invoices

Finally, the report analyzed the Past Due Recovery Rate for subscription businesses, measuring the percentage of past-due invoices for which payments was recovered. The overall figure stood at 45.8%, with a significant discrepancy between B2B (53.5%) and B2C (34.6%) businesses, which may again relate to potentially higher numbers of subscribers to B2C businesses.

The industry analysis for Past Due Recovery Rate shows that SaaS businesses stand well above the rest: these businesses recovered a majority (53.5%) of past due invoices, the only industry type to do so. By contrast, subscription businesses in the Education industry recovered only about half as many (28.6%).

As far as price points go, businesses with higher ARPCs exhibited a considerably greater ability to recover past due invoices than their lower-ARPC counterparts.

The full analysis can be found here.

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